Monitors are great. They've caused more confusion and questions than practically anything else in the mod.
Like ZgB said, a monitor is a ship specifically designed for shore bombardment. They're not just "a hull" though; they're specially designed with shallow draught and anti-torpedo bulges (a technology developed shortly before the war) because they have to operate close in to a hostile shoreline, at risk from mines and submarines and torpedo boats.
Their armament consists of a single turret with battleship-calibre guns - the first monitors used 14" guns, others built used 12" to 15". That's why they're in the battleship tech tree; you can't build monitors until you've invented superdreadnought-calibre guns.
The first monitors were built by Britain in November 1914 - Winston Churchill had the idea. They were called "monitors" because they vaguely resembled the original ironclad monitors, and also because the guns used on the first batch were made in the USA and Churchill wanted to honour the Americans by calling the new ships after a US ship. (He actually planned to call the four ships
General Grant, Admiral Farragut, Robert E Lee and
Stonewall Jackson, but the US State Department objected because they thought that would compromise their neutrality...).
Britain constructed over a dozen monitors during the war, using them to support the Gallipolli landings, the operations at Salonika, and to bombard the Belgian coast - and it was planned to use them during the planned but never carried out amphibious landings on the northern coast of Europe. The only other country to build any was Italy. In the game, they're intended to be a cheap method of getting shore bombardment capacity. Not very useful, true - but in a scenario set after 1914 they'd need to be in the British order of battle, and besides I think they're an interesting bit of historical chrome.